A disappointing jobs report, retail sales that were less than
expected, and worries over bank foreclosures could not derail
stocks from their upward march last week. Despite all of these
factors, the Dow fell only 0.19% Friday, the S&P 500 was off
just 0.18%, and the Nasdaq fell 0.25%. But all of the major indices
were higher for the first week of the new year.
On Friday, financial stocks led a minor round of profit-taking
with Dow components
JPMorgan Chase & Co.
) off 1.9% and
Bank of America
) down 1.3%. Banks hit the skids following a Massachusetts State
Supreme Court ruling that two foreclosures from
Wells Fargo & Company
) were invalid because the banks failed to show that they held the
mortgages at the time of the foreclosure. USB fell 0.76% and WFC
was hit with a loss of 2.02%.
The technology sector, up 2.7%, and financial sector, up 1.7%,
led the S&P 500 for the week, despite a slight pullback in
financial stocks on Friday. Telecommunications and retail stocks
were weak throughout the week.
In economic news, the unemployment rate fell to 9.4% in December
from 9.8% in November, but a substantial number of drop-outs from
the national pool of workers made the percentage decline almost
meaningless. About 8.4 million jobs were lost during the recession,
and in 2010 only 1.1 million were added.
In testimony before the Senate Budget Committee, Federal Reserve
Chairman Ben Bernanke said, "Overall, the pace of economic recovery
seems likely to be moderately stronger in 2011 than it was in
2010." There was no indication that the Fed is likely to waver on
its November decision to purchase $600 billion of Treasurys.
Treasury prices rose on Friday due to the lower-than-expected
jobs number with the benchmark 10-year note at a yield of 3.329%.
The euro fell to a four-month low at $1.2910, down from $1.3015 on
Thursday on worries over a slow euro zone recovery.
At Friday's close, the Dow Jones Industrial Average fell 23
points to 11,675, the S&P 500 fell 2 points to 1,272, and the
Nasdaq lost 7 points at 2,703. The NYSE traded 1.1 billion shares
with decliners over advancers by 1.3-to-1. The Nasdaq exchanged 515
million shares with decliners ahead by 1.7-to-1. For the week, the
Dow gained 0.8%, the S&P 500 rose 1.1%, and the Nasdaq was up
Crude oil for delivery in February fell 35 cents to $88.03 a
Energy Select Sector SPDR
) rose 49 cents to $68.28. February gold was down $2.80 to
PHLX Gold/Silver Sector Index
) rose 0.31 points to 211.3.
What the Markets Are Saying
Despite poor numbers from the important unemployment report, and
sentiment and internal indicators that are very overbought, stocks
held their own on Friday. And that's a good sign since a
disappointment from such an important report would normally lead to
But with internal and sentiment numbers at what S&P analyst
Mark Arbeter calls "the limits of excessiveness," how long can the
market continue to move forward? We saw the indicators hold at
relatively high levels for weeks last year before enough sellers
emerged to turn stocks lower. From March to April, and again from
September to November, both the internal and sentiment indicators
held above what is considered "excessive" before buyers finally ran
out of steam.
However, when the market hit the wall in May and finally headed
south, it resulted in a jarring loss of almost 15%. On the other
hand, the November/December correction was mild at just 5%. And
even though the spring sell-off rocked the market, it gave traders
enough advance warning that something was amiss when the Dow's
20-day moving average gave way, followed in just three days by a
bizarre crush of the 50-day moving average. At that point, everyone
should have sold "at the market."
In November, the 20-day gave way, and it took 10 days before the
Dow slightly penetrated the 50-day moving average and turned up. It
was clear in November that sellers were not going to be able to
generate the massive attack of early May.
Even though the internal and sentiment indicators are at very high
levels, the market continues to ignore "bad news." Short- ,
intermediate-, and long-term trends are still up, and strong group
rotation led stocks to new highs in the first week of January. The
bull is still on the field and investors are waiting in line to
For one stock to buy now, see the
Trade of the Day
Today's Trading Landscape
To see a list of the companies reporting earnings today,
For a list of this week's economic reports due out,
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